Warner Bros. loses Alan Ladd, Jr. appeal

EXCLUSIVE: A California Court of Appeal has just sided with producer Alan Ladd, Jr. in his long-running dispute with Warner Bros. over profits from a slate of films including "Blade Runner," "Chariots of Fire" and the "Police Academy" movies.

Ladd and producer Jay Kanter's The Ladd Co. won a $3.2 million jury verdict against Warners in 2007 for underallocating license fees for Ladd Co. movies included in large packages. The case was among the first to reach a jury over the studio practice of "straight-lining," or allocating the same share of a blanket license fee to every movie in a package, regardless of its value.

Ladd, a well-known producer and former studio exec (he famously greenlit "Star Wars"), convinced a jury that Warners had grouped his hit movies with a bunch of stinkers and assigned license fees that shortchanged their true value by about $97 million to reduce the profit participation owed to him. (Full disclosure: I worked on this case as a litigator for Ladd before joining THR but wasn't involved in the trial or the appeal.)

Warners appealed the ruling, arguing that Ladd had failed to prove a breach of contract and that the damages calculations weren't supported by the evidence or the testimony of Ladd's expert. The Court of Appeals, in a 25-page opinion, disagrees.

"The record supports the jury's determination that Warner's straight-lining method of allocating license fees to profit participants breached the implied covenant of good faith and fair dealing," the three judge panel ruled, also upholding the damages.

"This is the right result," Ladd's lead attorney John Gatti tells us. "Justice was delayed but justice is served. It's a well-reasoned opinion and we are happy that the efforts of Mr. Ladd and Mr. Kanter have paid off."

A Warners rep said the studio hasn't read the decision and declined to comment. UPDATE: The studio gives us this comment: "We respectfully disagree with the court's ruling and will be considering our options with respect to further review "

The appeals panel focused on testimony by Warners exec Eric Frankel, who was called by Ladd as an adverse witness. Frankel said Warners was required to "fairly and accurately allocate license fees to each of the films based on their comparative value as part of a package" and that the valuation factors included "the vintage of the film, the boxoffice, the genre, the star, the awards, the utility, can you play it in multiple day parts or is it a movie that's too sexy that maybe you can only play at 10:00 at night."

That testimony, coupled with Ladd's evidence that Warners had often licensed Ladd films in packages that valued each film the same, was enough for the appeals panel to uphold the verdict.

Warners took another blow. The studio had won a portion of the case relating to the deletion of Ladd's screen credits on home video versions of "Blade Runner" "Chariots of Fire" and "Once Upon a Time in America." (Basically, the Ladd Co. logo and Ladd's name wasn't included in some later versions of the movies, which Ladd claimed damaged his reputation in Hollywood.) The trial judge shot down that claim but the appeals panel has now reversed and remanded that issue back to the lower court for a retrial.

The opinion is partially published, meaning it can be cited in future cases. That should be music to the ears of producers and other profit participants who wonder whether their films have been allocated the correct value in package licenses.

Ladd was repped in the appeal by John Gatti and John Lucas at LA's Stroock & Stroock & Lavan, with help from the Greines Martin Stein & Richland firm. Warners' side was handled by John Taylor, Jr., Frederic Cohen and Jason Litt of Horvitz & Levy, with Michael Bergman, Steven Glaser and Julie Ephraim at Weissmann Wolff.